New Pay As You Grow facility will enable more flexible repayments on Bounce Back Loans for UK smaller businesses
The British Business Bank, the UK’s economic development bank, today announces further details of Pay As You Grow, which helps UK smaller businesses that have taken out a Covid-19 emergency Bounce Back Loan to manage their cashflow and have a better chance of getting back to growth.
Originally announced by the Chancellor of the Exchequer in September 2020, Pay As You Grow (PAYG) will enable businesses who have started repaying their Bounce Back Loans to:
- request an extension of their loan term to 10 years from six years, at the same fixed interest rate of 2.5%
- reduce their monthly repayments for six months by paying interest only. This option is available up to three times during the term of their Bounce Back Loan
- take a repayment holiday for up to six months. This option is available once during the term of their Bounce Back Loan.
Borrowers can use these options individually or in combination with each other, and remain responsible for repaying their Bounce Back Loan and fully liable for the debt.
Lenders will start to communicate Pay As You Grow (PAYG) options to Bounce Back Loan Scheme borrowers three months before repayments commence. Lenders will inform their customers about PAYG directly, so borrowers should wait until they are contacted by their lender before enquiring about the scheme. Lenders will advise customers about how their payment profiles may change according to their choices under the scheme. Businesses first began to receive BBLS loans in May 2020 and the first repayments will become due from May 2021 onwards.
Richard Bearman, Managing Director, Small Business Lending, British Business Bank, said: “Pay As You Grow will provide tangible benefits to Bounce Back Loan recipients, many of whom may have accessed the Bounce Back Loan Scheme to borrow money for their business for the first time. The scheme offers greater flexibility to businesses who may need flexibility in paying off their Bounce Back Loan and enables them to manage their repayments more effectively.”
Business Secretary Kwasi Kwarteng said: “The comprehensive and generous financial support package we have delivered across the UK has protected jobs, saved businesses and kept local economies on the move.
“While our vaccine rollout is moving at an incredible pace and the end is in sight, we know times are still tough for many companies and extra support is needed.
“These flexible repayment options will give businesses the time they need to recover from the pandemic before paying back loans, giving them the breathing space and confidence to build back better.”
Stephen Pegge, Managing Director of Commercial Finance at UK Finance, said: “The UK’s banking and finance industry is delivering an unprecedented level of support to businesses across the UK to help them navigate the crisis and set them up for recovery. Nearly 1.5 million businesses have received a Bounce Back Loan (BBL) since the scheme launched in May last year.
“As the outlook for many businesses remains challenging, the flexibility of Pay As You Grow will help smaller businesses manage their cash flow and repayments. Lenders will be contacting BBL borrowers in advance of their first payments to outline their options.
“Government-backed loans are just one part of the industry’s wider support for businesses alongside commercial lending, capital repayment holidays, extended overdrafts and asset-based finance – meaning there is a range of help available for any firm that needs it.”
Dr Adam Marshall, Director General of the British Chambers of Commerce, said: “The Bounce Back loan scheme has been an important lifeline for many small businesses during the pandemic.
“With many businesses still facing diminished cashflow, the flexibility provided by Pay As You Grow has a crucial role to play in providing firms who have received a Bounce Back Loan with much-needed headroom to manage their repayments through this continued economic storm.
“Chambers of Commerce across the country will ensure that businesses in their local communities are aware of the Pay As You Grow scheme.”
Chris Wilford, Head of Financial Services Policy, CBI, said: “Pay As You Grow will provide vital support to many businesses who hope to move from survival to recovery mode when the economy gradually reopens.”
“The combination of payment extensions, reductions and holidays gives firms important flexibility as they manage tight cash flows.”
“Businesses have hugely welcomed the Government’s financial support package throughout, with guaranteed loans having provided a lifeline to more than 1.5 million businesses so far.”
FSB National Vice Chair Martin McTague said: “With the first bounce back loan repayments hitting against a backdrop of continued restrictions, it’s critical that small firms are aware of all their options. As such it’s good to see efforts to expand understanding of, and access to, Pay As You Grow plans.
“These should help many small firms to keep debts manageable as they drive our recovery from an incredibly deep recession. Ultimately, bounce back facilities have been made possible by the Government as part of efforts to see us through a national crisis. Lenders must be mindful of this fact, and treat borrowers accordingly over the months ahead.”
The Bounce Back Loan Scheme launched on 4 May 2020. It provides financial support to businesses across the UK that are losing revenue, and seeing their cashflow disrupted, as a result of the Covid-19 pandemic. Since May 2020, the scheme has supported nearly £45bn of loans to 1.5m businesses.
Businesses can apply for a loan from £2,000 up to 25% of their business’ turnover, with a fixed interest rate of 2.5% for the duration of the loan, meaning all borrowers benefit from the same, affordable rate of interest. The maximum loan amount is £50,000, and the Government will make a Business Interruption Payment (BIP) to cover the first 12 months of interest payments. The borrower does not have to make any repayments for the first 12 months.
Businesses who have concerns regarding repaying debt should contact their lender, and can find additional links to resources on the British Business Bank’s Finance Hub.
About the British Business Bank
The British Business Bank is the UK government’s economic development bank. Established in November 2014, its mission is to make finance markets for smaller businesses work more effectively, enabling those businesses to prosper, grow and build UK economic activity. Its remit is to design, deliver and efficiently manage UK-wide smaller business access to finance programmes for the UK government.
The British Business Bank’s core programmes support nearly £8bn of finance to almost 94,800 smaller businesses. Since March 2020, the British Business Bank has also launched four new Coronavirus business loan schemes, delivering more than £72bn of finance to over 1.5m businesses. 
As well as increasing both supply and diversity of finance for UK smaller businesses through its programmes, the Bank works to raise awareness of the finance options available to smaller businesses. The British Business Bank Finance Hub provides independent and impartial information to businesses about their finance options, featuring short films, expert guides, checklists and articles from finance providers to help make their application a success. In light of the coronavirus pandemic and EU Exit, the Finance Hub has expanded and it now targets a wider business audience. It continues to provide information and support for scale-up, high growth and potential high growth businesses, but now provides increased content, information and products for businesses in survival and recovery mindsets. The Finance Hub has been redesigned and repositioned to reflect this, during this period of economic uncertainty.
British Business Bank plc is a public limited company registered in England and Wales, registration number 08616013, registered office at Steel City House, West Street, Sheffield, S1 2GQ. It is a development bank wholly owned by HM Government. British Business Bank plc and its subsidiaries are not banking institutions and do not operate as such. They are not authorised or regulated by the Prudential Regulation Authority (PRA) or the Financial Conduct Authority (FCA). A complete legal structure chart for the group can be found at www.british-business-bank.co.uk
 Borrowers should be aware that they will pay more interest overall if they use one or more of these options, and that the length of the loan will increase in line with any repayment holidays taken.
 Figures as of 25 January 2021
 Figures as at end of June 2020
 Figures as at 28 January 2021